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Industrial Targeting and Non‐shiftable Capital in the Harris–Todaro Model

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  • Jai‐Young Choi
  • Eden S. H. Yu

Abstract

This paper shows that, in the 2 × 3 sector‐specific capital Harris–Todaro model, capital growth owing to either domestic or foreign investment always enhances the welfare of the country (i.e. non‐immiserizing), and this result of non‐immiserizing foreign investment holds regardless of initial holdings of foreign capital; the policy of industrial targeting via capital investment is more effective vis‐à‐vis the (neoclassical) 2 × 2 mobile‐capital Harris–Todaro model or the Heckscher–Ohlin model; in contrast to the recent generalization by Marjit and Beladi (2003), capital growth cannot be immiserizing in the present model, even if it destroys the “envelope theorem.”

Suggested Citation

  • Jai‐Young Choi & Eden S. H. Yu, 2006. "Industrial Targeting and Non‐shiftable Capital in the Harris–Todaro Model," Review of International Economics, Wiley Blackwell, vol. 14(5), pages 910-921, November.
    • Handle: RePEc:bla:reviec:v:14:y:2006:i:5:p:910-921
    DOI: 10.1111/j.1467-9396.2006.00607.x
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    Cited by:

    1. Eden S. H. Yu & Jai-Young Choi, 2013. "Factor Growth and Foreign Investment under Product Market Imperfection in the Harris–Todaro Economy," Pacific Economic Review, Wiley Blackwell, vol. 18(5), pages 584-602, December.
    2. M. Ali Khan, 2007. "The Harris-Todaro Hypothesis," PIDE-Working Papers 2007:16, Pakistan Institute of Development Economics.
    3. Jai‐Young Choi & Eden S. H. Yu, 2010. "Imperfect Capital Mobility: A General Approach to the Two‐Sector Harris Todaro Model," Review of International Economics, Wiley Blackwell, vol. 18(1), pages 81-94, February.
    4. Lee, Seung-Hyun & Peng, Mike W. & Song, Sangcheol, 2013. "Governments, entrepreneurs, and positive externalities: A real options perspective," European Management Journal, Elsevier, vol. 31(4), pages 333-347.
    5. Takeuchi, Nobuyuki, 2012. "Reconsidering the effect of economic development on urban unemployment under non-homothetic preferences," MPRA Paper 39378, University Library of Munich, Germany.

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